U of L appears near to deal with health-care partner for University Hospital

Negotiations continuing

Oct. 12, 2012

Written by

The Courier-Journal

University of Louisville trustees served notice Thursday that they are near a deal with a health care provider that would be its partner and share the cost and management of its health operations, including the financially stressed University Hospital, the community’s chief safety-net facility.

At Thursday’s meeting, the trustees gave Dr. David Dunn, U of L’s executive vice president for health affairs, the authority to negotiate and sign a final agreement with an undisclosed health care company.

Dunn said in an interview after the trustees acted that, under state procurement rules, he can’t provide any details about the companies that responded to U of L’s request for proposals for a partner in February.

He said, however, that more than one company responded, more than one company is still in negotiations and no respondent has been eliminated from consideration.

And he said he expects that a deal can be struck “long before” the end of the year.

Gary Mans, director for health sciences and a spokesman for the school’s Health Sciences Center, interpreted the trustees’ decision to give Dunn the authority to sign a partnership agreement as an indication that they are satisfied with the progress of the negotiations. After several closed-door sessions in the past few months, the trustees had an hourlong closed session Thursday before quickly passing the motion giving Dunn the authority to close a deal.

U of L pursued a merger last year with Jewish Hospital & St. Mary’s HealthCare and St. Joseph Health System, which is owned by Denver-based Catholic Health Initiatives. St. Joseph would have had majority control and said it would follow Catholic health rules. But Gov. Steve Beshear and Attorney General Jack Conway both rejected the merger, citing such legal and policy problems as the potential loss of control of University Hospital as a public asset as well as questions about church-and-state issues.

Any new U of L health care arrangement will be submitted to Beshear and Conway for approval.

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University officials said Thursday that any deal will have to be endorsed by the University Medical Center board, a separate, nonprofit entity that oversees the hospital and the companion James Graham Brown Cancer Center. And Dunn said he would give the trustees an opportunity to review any final deal if it contained any unexpected provisions.

Given the problems with the previous effort, U of L “has no plan to do a merger,” Dunn said. He said possible arrangements include a joint venture, a joint operating agreement or a management agreement.

The goal “is to find a health system partner, for both the Health Sciences Center and the cancer center and University Hospital,” he said. The Health Sciences Center has four divisions, the schools of medicine, nursing, dentistry, and public health and information sciences.

He said the objective is to create an “integrated health care system” that would maintain quality treatment, including indigent care at the 329-bed hospital, at U of L facilities. Dunn said the university must have a health care partner that will “provide financial assistance and also help will programs and allow them to grow.”

In exchange, the new partner and its clients will have access to the facilities and the research conducted at the Health Sciences Center, he said.

Consultants told U of L officials last spring that University Medical Center’s hospital and cancer center have a very thin operating margin, despite net revenues of more than $470 million. It noted that 24 percent of the hospital’s patients are uninsured and 29 percent are on Medicaid. The city has recently cut back its indigent-care funding amid its own budget problems.

In other action at the meeting, the trustees:

• Heard an update on matters related to Wednesday’s discovery of mold in Miller Hall dormitory that is requiring the relocation of 270 freshmen, probably for the rest of the fall semester. U of L spokesman Mark Hebert told the board that preliminary testing has found the presence of at least some mold in one or more other Belknap Campus buildings. Hebert said that, on a worst-case basis, a few additional students may have to move out “overnight, or for a day or two,” while the buildings are cleaned. No other buildings “will have to be closed or shut down,” he said.

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Hebert said he doesn’t know the cost of the repair work. And President James Ramsey said maximum effort will be made so as not to disrupt the academic work of students.

• Heard a report from David Barker, associate vice president for audit services, on how the recent report by former FBI Director Louis Freeh on the Penn State University child-abuse scandal might affect U of L. Auditors examined the Freeh report, which included 120 recommendations and found a significant breakdown in communications among Penn State officials, from the standpoint of U of L’s departments of public safety, human resources, business affairs and athletics.

“Overall, we seem to be in pretty good shape,” Barker said.

However, the trustees asked their audit staff to continue to examine the report’s findings and how they might apply to U of L. Preliminary suggestions by the staff include increased training of the trustees on ethics and conflict-of-interest issues and a study of what risks U of L might face in carrying out its goals and objectives. The staff also stressed the importance of university officials sharing information and, perhaps most important, making sure that children visiting the campus for camps and other activities are protected. They also stressed the importance of reporting all on-campus crimes to police.

“We need a process in place, if heaven forbid, this ever begins to occur” at U of L, Barker said.

Ramsey said that university officials asked themselves “could this happen here?” He said Penn State is in a small, homogeneous community, with a non-aggressive media. U of L, in contrast, is in a totally different environment that perhaps would make it “hard for something like this to take place.”